Jeff Bevis, chief operating officer of Caring Senior Service, has been in franchising for 37 years, and 19 of those years have been dedicated to the home care industry. By Cindy Charette
Jeff Bevis, chief operating officer of Caring Senior Service, has been in franchising for 37 years, and 19 of those years have been dedicated to the home care industry. Bevis recently highlighted some important sections of a federal disclosure document (FDD) and shared that potential franchisees should pay close attention to them when considering a franchise.
Items 1 & 2
History and Business Experience:
This is important when exploring franchise options, Bevis said. For instance: Is the founder still involved, and is there hands-on operational experience from the top of the organization? Is it more of private equity/financial ownership? Bevis suggested that candidates consider if the system behind the brand would work best for them.
Items 3 & 4
Litigation and Bankruptcy:
If there is bankruptcy history within the leadership/ownership team, this is an area where you will want to get clarity. Even if only one or two cases are listed, dig into the description of those cases, and ask the franchisor to explain.
Item 6
Fees:
This shows other fees, including royalties and advertising, which you will be required to pay on an ongoing basis. You will want to know all the possible required fees and their frequency.
Item 7
Working Capital:
This section explains the fees and expenses required to open and operate your franchise for the first three months. This is an area you will want to review carefully with the franchisor to be sure you will sustain your business before you start making money.
Item 19
Financial Performance:
Bevis does not recommend considering a franchise without an Item 19. Even with an Item 19, there can be a tremendous amount of veiled information here, he said. “You really want to make sure that you pay close attention to that and understand it,” he added. “If there are questions, be sure you pose those back to the franchisor.”
Item 20
Closings and Transfer Charts:
These charts show the number of franchises opened, transferred and closed in the last three years. Look at transfers and the closings/ceased operations column. Those could be red flags if the brand was not growing.
Bevis also encourages potential franchisees to check with a third-party franchise review company to ensure the franchise has a high satisfaction report.
Cindy Charette